3. There are many factors in the macro-environment
that will effect the decisions of the managers of
any organization
Tax changes, new laws, trade barriers,
demographic change and government policy
changes are all examples of macro change
To help analyze these factors managers can
categorize them using the PESTEL model
4. Political factors
These refer to government policy such as the
degree of intervention in the economy
What goods and services does a government want
to provide?
To what extent does it believe in subsidising firms?
What are its priorities in terms of business support?
5. Economic factors
These include interest rates, taxation
changes, economic growth, inflation and
exchange rates
higher interest rates may deter investment because
it costs more to borrow
a strong currency may make exporting more difficult
because it may raise the price in terms of foreign
currency
inflation may provoke higher wage demands from
employees and raise costs
higher national income growth may boost demand
for a firm's products
6. Social factors
Changes in social trends can impact on the
demand for a firm's products and the
availability and willingness of individuals to
work
In the UK, for example, the population has been
ageing. This has increased the costs for firms who
are committed to pension payments for their
employees because their staff are living longer. It
also means some firms such as Asda have started
to recruit older employees to tap into this growing
labour pool. The ageing population also has impact
on demand: for example, demand for sheltered
accommodation and medicines has increased
whereas demand for toys is falling.
7. Technological factors
New technologies create new products and new
processes
MP3 players, computer games, online gambling
and high definition TVs are all new markets
created by technological advances
Online shopping, bar coding and computer aided
design are all improvements to the way we do
business as a result of better technology
Technology can reduce costs, improve quality
and lead to innovation
These developments can benefit consumers as
well as the organizations providing the products.
8. Environmental factors
Environmental factors include the weather and
climate change
Changes in temperature can impact on many
industries including farming, tourism and insurance
With major climate changes occurring due to global
warming and with greater environmental awareness
this external factor is becoming a significant issue for
firms to consider
The growing desire to protect the environment is
having an impact on many industries such as the
travel and transportation industries (for example,
more taxes being placed on air travel and the success
of hybrid cars) and the general move towards more
environmentally friendly products and processes is
affecting demand patterns and creating business
9. Legal factors
These are related to the legal environment in
which firms operate.
Legal changes can affect a firm's costs (e.g. if
new systems and procedures have to be
developed) and demand (e.g. if the law affects
the likelihood of customers buying the good or
using the service)
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